Accounting for Bitcoin
According to CNBC’s Kate Rooney, Tesla may have to list its Bitcoin holdings at a loss.
In February, Tesla announced its $1.5 billion investment. Per rules laid down by the Securities and Exchange Commission (SEC), holdings of any intangible asset—like Bitcoin—must be listed as an impairment charge if said asset drops below the value it was purchased at.
When news of Tesla’s investment broke, Bitcoin was valued at approximately $38,000. It has since fallen to a low of $31,000, meaning Tesla faces an impairment charge on its balance sheet.
Making matters worse, Tesla is not able to mark up the value of its Bitcoin on the occasion that its value increases post-investment. That can only happen if and when Tesla decides to sell its Bitcoin.
“Analysts I’ve been talking to are looking for between a $25 million and $100 million loss for Tesla on paper in the next quarter,” Rooney said, noting that it's not an exact science: “This is really a Rubik’s cube to figure out.”
Rooney added that, "The big thing crypto and analyst communities are watching: did Tesla sell any Bitcoin in the quarter to make up for some of those losses?" Tesla sold 10% of its Bitcoin in the first quarter of the year, with CEO Elon Musk explaining that it did so "to prove liquidity of Bitcoin as an alternative to holding cash on balance sheet."
Bitcoin’s rough Q2
The second quarter of 2021 was a turbulent one for companies with exposure to Bitcoin; it’s seen the cryptocurrency rise to an all-time high of over $63,000 to lows of under $30,000.
Overall, it’s been one of the worst quarters in Bitcoin’s history, with Bitcoin's returns at -40%, falling from 102% for the previous quarter.